A painful economic lesson for Thailand

It was a foregone conclusion that Thai economic officials would approve a proposal for "painful" tax increases and budget cuts. The proposal is part of an International Monetary Fund (IMF) economic aid package. There will be those in Thailand who will oppose this package on the grounds that, in their view, the cure is worse than the disease. But they will be wrong.

Every operation is painful but some are more painful than others. Without the operation, though, the patient cannot get well. Thailand has no choice.

The country is struggling to fund a multi-billion-dollar rescue of its finance and property industries and turn around an economy with the slowest growth rate in 11 years. And the IMF package, which will also include privatization of state enterprises, is the only way to achieve that.

A stark picture has been painted of how Thailand's careless, even reckless, policies have undermined the economy. The Thai government is believed to have haggled with the IMF team about the severity of the conditions attached to the credit line, such as the extent of budget cuts and a value-added tax increase. But the IMF is not a harsh taskmaster; it is merely realistic.

For years foreign money has flowed into Thailand, but much of it has ended up in unworkable projects that provided no returns. Other Third World countries also seek investment-led growth. They know that foreign investors bring tax revenues, employment and advanced technology. But they know, too, that these investments must be monitored. And efforts must be made to crack down on corruption. It is significant that Singapore and Malaysia were in a stronger position than Thailand when it came to resisting the attacks of currency speculators.

Thailand's economic woes are largely self-inflicted. It has failed to learn an important lesson: You have to work for your dollar.

-- The Hong Kong Standard